The US Owes Mexico at Least $37 Trillion in Reparations for Poverty, Violence, and Environmental Damage

Image by Robbie Herrera.

Most people are familiar with crippling third world debt, but what about the debt dominant nations like the US owe for harm caused to countries like Mexico? I’ve calculated that the US should pay Mexico a very bare minimum of US$37 trillion. That’s almost two years’ worth of the US’s GDP, or 35 years’ worth of Mexico’s GDP (a fact which itself demonstrates the massive inequality between the two neighbors).

Following the Trump years, the new Biden administration says it is trying to establish a better relationship with Mexico, through “cooperation.” Early in October, the US and Mexico began discussing a new joint security plan. “After 13 years of the Merida Initiative, it’s time for a comprehensive new approach to our security cooperation, one that will see us as equal partners in defining our shared priorities,” US Secretary of State Antony Blinken said.

The joint statement on the security dialogue was also pretentious spin; “As two nations with an enduring partnership based on sovereignty, mutual respect, and the extraordinary bond of family and friendship … we each recognize our shared responsibility and pledge to move forward as partners to find solutions that are backed by justice…”

In reality, “the relationship established with the US is profoundly unequal,” Oscar Espino, a member of Mexico’s National Indigenous Congress (CNI), told me in an interview, meaning the above statements are empty and impossible discourse.

Healthy relations between the US in Mexico can only happen by first acknowledging and understanding the harm the US has caused. Below, I break that down.

US’s promotion of violence and gun sales in Mexico

The US brought its so-called global “war on drugs,” a campaign of military aid and intervention, to Mexico in 2007, or formally in 2008, as the Merida Initiative. It provided Mexico with funding for military training and equipment.

The start of the Merida Initiative exactly corresponds to a sudden and ongoing increase in the rates of murder and disappearances in Mexico. Drug smuggling gangs increased by 900% from 2006 to 2012. Forced disappearances were at 18 per year in 2004, compared to 3,111 in 2010. With the increase in organized crime came kidnappings, more femicides, trafficking of women for sexual exploitation, torture, and a general and pervasive fear and distrust in Mexican society which is not endemic to the culture.

The violence, in turn, created refugees (some 357,000 people have been displaced from their homes due to violence or conflict since 2009), who were then often detained and deported when trying to enter the US. The restrictions at the US border have also facilitated even more organized crime there, as people are forced to pay traffickers to cross the border. Over 600,000 Mexicans were deported just in the past US financial year.

The Merida Initiative was also a way for the US to increase its arms sales to Mexico. Every year some 873,000 guns make their way here from the US. Almost 4 million crimes are committed each year with guns manufactured in the US. US companies Smith & Wesson, Beretta, Century Arms, Colt, Glock, Ruger y Barrett are deliberately manufacturing guns for the Mexico organized crime market. Colt, for example, markets its products with names like the .38 El Jefe (the boss), .88 El Grito (the scream), and .38 Emiliano Zapata 1911. The models of guns, like many US products in Mexico, have become status symbols.

Mexico is suing the US for the harm done by its arms industry. But for Miguel Parra, a Raramuri spokesperson from Mogotavo, Urique, in northern Mexico, “The arms industry affects us directly by promoting violence where we live … that’s because if there’s no war, there are no gun sales.”

For damage caused by the US through the Merida Initiative, I looked at the number of lives lost each year to murder, and the number of forced disappearances (people who were never found), that are above pre-Merida Initiative levels. That’s 236,099 lives since 2007, and at US$1 million per life, US$236 billion.

But that’s not enough. “If we asked the families of people who have been forcibly disappeared, victims of the US’s security policies … of gun violence and drug trafficking … I don’t think there are any economic conditions which could respond to so much pain,” said Espino.

Using Mexico as a waste dump

Everything changed for Mexico when NAFTA was signed in 1994. The agreement between the US, Mexico, and Canada, opened Mexico up much more to imports and exports. US multinationals quickly set up hundreds of factories in order to take advantage of lower Mexican wages and utility costs, and the NAFTA provisions forced Mexico into tolerating almost all pollution and environmental consequences. Chapter 11 of NAFTA, for example, says foreign investors who think their profits are being harmed by environmental or public health regulations can sue the government for cash damages. And the US MetalClad Corporation, for example, did just that. Local authorities found the waste-disposal company would contaminate the local water supply and ordered it to close down, so Metalclad sued and won.

Essentially, the US sent much of its polluting industry to Mexico, Mexicans produced the goods, which were then sent back to the US for consumers there. Mexican government figures found the cost of NAFTA-related environmental damage in 1999 alone was US$47 billion, with annual damages from pollution at least US$36 billion per year.

Mexicali, near the US border, was previously a gentle agricultural city. US factories began to set up there in the 1980s, then much more intensely with NAFTA. Now, thanks to companies like Kellogg’s, Gulfstream, Raytheon, Collins Aerospace, National Oilwell Varco, Autolite, and Coca-Cola, Mexicali has some of the worst air pollution levels in Mexico, and high rates of asthma and deaths from respiratory illnesses.

Mexico’s science and technology institute, Conacyt, identified 50 regions experiencing environmental emergencies in Mexico. The “environmental hells,” as it called them, are all located in or near industrial corridors operating under the free trade agreement.

The only available figure that looks specifically at the damage caused by US companies is the 1999 NAFTA figure, so I have used that and calculated its value for the following years considering the expansion of US multinationals here, then removing a percentage for Canada. The cost would be US$1.52 trillion.

Causing poverty through unequal trade, resource robbery, and extreme worker exploitation

There are now some 18,000 US companies operating in Mexico. The extremely low wages they pay are causing the poverty that the Biden administration has claimed it wants to get to the roots of, in order to prevent further migration.

US companies pay Mexican manufacturing workers US$2.40 to $2.70 an hour, compared to the typical wage of US$30 in the US. That means that US companies can save 70% of their labor costs, and cut total operating costs by around 80% (when you include the cheaper rent and utilities).

The conditions in the factories and places like Amazon and Walmart are also causing mental and physical health harm. In the factories, people sometimes have to stand for 21 hours straight in order to save factory space and ensure they don’t sleep. They are often exposed to chemicals, have respiratory issues, and go without drinking water all day in order to meet production targets.

In Amazon in Mexico, there is mandatory overtime, 60-hour weeks, and unfair dismissal is common. Walmart has used senior citizens to as baggers, paying them no wage at all (despite enforcing shifts), and making them depend on tips for an income. Workers there earn 13 pesos an hour (US$0.63), which is not usually enough for rent, let alone other expenses.

Using the 80% savings rate for using Mexican labor and utilities, as well as the US Bureau of Economic Analysis (BEA)’s figures for multinational net profits in Mexico (which only consider companies with revenue over US$25 million) and adjusting for inflation, I calculated that the US owes Mexico at least US$336 billion since 2000 for exploitation.

And while US and other foreign companies pay next to nothing for Mexico’s water, there are also companies like Coca Cola which bottle Mexico’s water and then sell it back to locals for a profit, and Constellation Brands, which also takes Mexican water, turns it into beer, then sells the beer in the US, leaving Mexicans with nothing but severe water shortages.

Foreign companies are also extracting 60,800 barrels of Mexico’s petroleum a day, while others are cutting up Mexican land and sending pieces of it, in the form of minerals and metals, up north.

Over the past two years, US and Canadian companies have received 87% of mining concessions in Mexico. These companies keep almost all of the profits from Mexican resources, paying just 0.4 to 2% of the total value of the mining in fees, and just 6 to 129 pesos (less than US$10) per hectare for licensed land. Meanwhile, farmers and Indigenous peoples are kicked off their land, and social and environmental conflicts, violence, and corruption abound near the mines.

How much has the US stolen through its mines in Mexico since 2000? I looked at US mining exports for each year, factored in the measly taxes, and adjusted for inflation, and it comes to $154.4 billion.

But perhaps worst of all, is the overall poverty caused by NAFTA. It totally reorganized how Mexico’s economy, and therefore its social and traditional structures as well, functioned. US products replaced local products and altered Mexicans’ diets, Walmarts replaced the tianguis market system that worked so well prior even to the Spanish invasion, and Mexico now imports corn – which is not just a diet basic, but also fundamental to Mexicans’ identities and philosophies.

Espino described how Mexican companies were struggling to survive, and how US companies, instead of increasing employment, ended up encouraging people to migrate from rural areas to industrial cities. “There were never any opportunities for work that really benefited Mexicans,” he said. “The economic interests of the US determine the policy that it imposes on Mexico and that has brought environmental and social plundering,” he added.

Ultimately, the US deliberately maintained and caused poverty in Mexico, following on from the effects of colonization. NAFTA saw millions lose their jobs and land, with Mexico having to change its constitution so that land permanently deeded to Mexican small farmers could be sold, seized, and owned by foreigners. Corn farmers received 70% less for their harvests as US subsidized corn imports to Mexico quadrupled. When USMCA replaced NAFTA on July 2020, this unfair trade regime was upheld.

If Mexico had been allowed to maintain its 1960-1980 growth rate, it could have had a per-capita output similar to Portugal or South Korea by now, the Center for Economic and Policy Research (CEPR) argued, with few Mexicans needing to migrate to the US. Instead, from the implementation of NAFTA in 1994 through to 2012, Mexico’s poverty rate and wages have barely changed.

Mexico and South Korea were growing at a very similar rate prior to NAFTA, and they had the same GDP per capita PPP when it was implemented so I used South Korea’s evolving GDP per capita over the past 20 years, compared to Mexico’s, to calculate the economic impact of NAFTA. Over 20 years, the US (and Canada’s) economic policy with Mexico deprived the country of US$35.325 trillion.

The total damage

Of course, no number can ever truly compensate for pain or suffering. The total figure of US$37.235 trillion includes all of the above numbers, except for the wage exploitation, which would be part of the overall poverty figure. I have had to get creative. Market reports, national data, and other information are much more available for wealthy countries than Mexico, and I had to use the figures that existed, then triangulate them and add them up for each year.

US$37 trillion is a bare minimum. It doesn’t include the generalized trauma of violence and poverty, of a lack of sovereignty to a dominant country, or of the ongoing messaging that the US and its “democracy,” products and culture, are superior to Mexico’s. It doesn’t include the way poverty is unempowering and renders humans helpless and hopeless, and how it inhibits a thriving childhood of discovery and growth, restricts agency, and haunts self esteems. It doesn’t include how environmental damage, beyond budget implications, wrecks people’s cultural homes, histories, and way of life.

For Parra, the imposition of strictly controlled borders, where people from the US can easily enter Mexico, but Indigenous Mexicans can’t move freely, have an enormous psychological impact.

“As Indigenous people, we don’t have borders,” he said. Moving from one place to another is natural, “but as Indigenous people, we are in a reality that we sometimes don’t understand … the borders are a political and social control.”

So while it doesn’t capture everything, what the figure can indicate, however, is the extent to which the US is benefiting from an unequal, exploitative, and abusive relationship with Mexico, and just how insufficient small gestures are towards creating any kind of inequality and justice.

What applies to the US and Mexico, also applies in a general way to the US and Latin America, and to the relationship between wealthy regions and poorer countries. How much would the US have to pay to compensate for the coups it has orchestrated in Latin America, and their far-reaching consequences, or for other interventions, sanctions, economic policy, and funding of contras and other anti-revolutionary tactics?

Globally, rich countries are not helping poor countries to develop. They are stealing money and resources from poorer countries on a huge scale, so that in reality, poor countries develop rich countries, at the point of a metaphorical or literal gun.

Beyond reparations, “a plan for justice is what is needed. Part of that would be freedom for Indigenous peoples to travel anywhere,” said Parra. And for Espino, it is up to Mexico to protect itself from the US’s “policies of plundering resources.” He hopes for a day when Mexico is truly sovereign and is able to manage things for itself.

Tamara Pearson is a long time journalist based in Latin America, and author of The Butterfly Prison. Her writings can be found at her blog.